EDGE_G_4 12-59-34_Layout 1 - The Tax Shelter Report

12 Edge Performance VCT plc
PART 1: INFORMATION RELATING TO THE COMPANY
Introduction
Using the skills of the Directors and the investment team of the Manager who collectively have a depth of experience in
the entertainment industry, Edge Performance was established for the purpose of investing in the entertainment industry,
initially concentrating on companies which promote live music, theatre, sports, festivals trade shows, exhibitions and other
events where people attend in person, and subsequently seeking to invest in the broader entertainment sector.
Through five previous offers for subscription, Edge Performance has raised in excess of £77 million since 2006.
The C Share Fund has already met the target of full investment as required by VCT legislation. The Company has the
benefit of contractual options to make further investments and is committed to making a number of additional new
investments; these investments together will mean that the D and E Share Funds will be fully invested, as required by VCT
legislation, within the coming months. Furthermore, the Company has identified sufficient suitable specific investment
opportunities which, when concluded, will mean that the F Share will similarly have met the requirement of full investment.
Edge Performance continues regularly to identify or receive approaches for attractive investment opportunities in the wider
entertainment sector. Moreover, the Manager believes that the reduced levels of funding generally available to businesses
through borrowing means that terms of investment which Edge Performance is able to obtain will become increasingly
attractive. For these reasons, the Directors are confident that the required minimum of 70% of the additional funds raised
as a consequence of the Offer can be invested in Qualifying Investments within a reasonable period.
Edge Performance’s structure aims to minimise the risk to the investor, whilst still permitting the investor to benefit from
the attractive returns available in the entertainment business.
The Company intends to invest a portion of the proceeds of the Offer in companies alongside established businesses with
expertise in the sector. The Company intends that some of these companies will enter into agreements which will provide
for a minimum guaranteed return. Investments will be spread amongst those offering higher minimum contractual returns,
with little of Investors’ capital at risk, and those with more modest minimum returns but with significantly higher potential
returns. The majority of the portfolio investments will include loan finance which should provide additional capital protection.
Edge Performance’s structure provides for investments to be blended so that the Investor’s risk should be minimised,
underpinning the return of the Investor’s effective cost of investment of 70p per Share (assuming income tax relief at
30%), with potential for a significant return on the Investor’s gross investment.
Edge Performance already has in place agreements with established promoters who wish to enter into event licensing
arrangements with Events Companies into which the Company will invest a portion of the net proceeds of the Offer.
Edge Performance intends to continue to use the extensive network of contacts of the Manager’s investment team and
the Board to identify suitable investment opportunities.
XV:5.1
I:9.1
The Entertainment Market
“Once a person has all the things they need to live, everything else is entertainment” 3
Entertainment sustains us. In good times it is celebration, in less good times, consolation. 35,000 years ago, in the depths
of an ice age, huddled in a cave at the very beginning of our history, it is believed that the earliest humans carved flutes
to pass the time and keep the darkness at bay. 4 This need and longing for entertainment remains, but today we enjoy
many more options and spend nearly half of our waking hours engaged with some form of media, entertainment or
communications. 5
Entertainment and media properties benefit from being highly transferable, making them attractive investment opportunities.
For instance, a successful UK book may go on to become a film, then perhaps also a TV series – re-using elements such
as the characters and theme music – and then be sold around the world and released on DVD at each stage. Games can
spawn screen formats, books, magazines, live shows and vice versa. Each new channel brings further opportunities to
exploit fundamentally the same intellectual property, often at minimal extra cost, and has a reinforcing effect on those
which already exist.
Music
In a recent survey, seven out of ten respondents agreed that “music is part of my identity”. 6 The past few years have seen
a marked shift in the music industry. No longer is the physical sale of recorded music formats like CDs the main driver,
with concerts largely an adjunct to sell more records. In 2007, consumer spending on live music overtook recorded music
for the first time since the birth of rock ‘n’ roll, and in the last two years it has remained ahead.
3 Neal Stephenson, author
4 New York Times – June 24, 2009 – “Flutes Offer Clues to Stone-Age Music”
5 Ofcom – Communications Market Report 2010
6 IPC Insight / Music Week